Civil Aviation Bill

Public Bill Committee, 6 March 2012.

Clause 21 - Content and effect of licence conditions

Seema Malhotra (Labour, Feltham and Heston)

I beg to move amendment 31, in clause 21, page 14, line 31, at end insert—

‘(g) provision relating to a compensation scheme for the noise pollution arising out of licensed activities which affects persons residing or occupying business or community premises in an area designated in the licence conditions.’.

It is a privilege to serve under your chairmanship, Mrs Riordan, and I am grateful for the opportunity to introduce the amendment and to debate clause 21. I welcome the Government’s recognition of the importance of the environment to aviation and the fact that that informs important principles underlying their emerging sustainable aviation policy framework. The CAA’s recently published consultation document, “CAA and the Environment”, also states that the CAA, as the aviation industry’s regulator, has a potentially key role to play in helping the sector improve its environmental performance. The CAA’s stance is helpfully stated as follows:

“In areas such as airspace and noise, where we have a driving role, we will promote stretching environmental outcomes and challenge industry to deliver against them”.

We all recognise the need for aviation to support our economy and the vital importance of airports in providing local employment. However, one set of stakeholder needs that do not appear to be as well recognised or reflected in the Bill, or in the CAA’s useful environmental consultation document, are those of the residents who live around airports and who are exposed to aircraft and other noise that may arise from licensed activities and surface transport. The consultation document states that aviation noise is a local issue for neighbourhoods around airports and that any policy solutions will need to find ways for residents and airport owners to engage with each other more constructively. However, although the wording that describes the desired outcomes for the CAA’s environmental objective, as set out in its strategic plan, refers to sector ambitions, to consumers and to consumer choice, no specific reference is made to local residents.

Jim Shannon (DUP, Strangford)

Regarding the stalemates that may arise in relation to an extension to an airport and local residents concerned about noise, is some method of arbitration perhaps necessary within the legislation to ensure that, where there are two opposing points of view, somewhere in between can be found for them to agree on?

Seema Malhotra (Labour, Feltham and Heston)

I thank my hon. Friend for that intervention, and I will be commenting on extending the CAA’s role beyond just reporting on the environment to potential roles as referee and adviser.

As I was saying, the CAA’s environmental objective refers to sector ambitions, to consumers and to consumer choice, but there is no specific reference to local residents, despite a reference to a clear commitment to protect the public’s interests. We support the work on noise modelling and environmental reporting that the CAA will be undertaking. Although the amendment makes specific reference to noise pollution, other vital environmental issues, including emissions, reporting and so on, are covered by other amendments and will be debated during consideration of later clauses or returned to in later stages of the Bill.

The amendment has the support of my local authority, the London borough of Hounslow, and, in essence, it seeks a provision relating to a compensation scheme for noise pollution arising from licensed activities. The measure would support local residents, businesses, and community premises being potentially insulated according to a formula based on geographic zone or noise levels that could be decided or kept under review by the Secretary of State, as a minimum level of the airport’s responsibility to the local area.

Heathrow is a vital economic asset, which provides employment to many thousands of my constituents and those of neighbouring boroughs. It is estimated that Heathrow provides more than 110,000 jobs. For Hounslow’s quarter of a million residents, however, the daily environmental impacts of Heathrow include flights overhead every 60 seconds, and the majority of the borough is located within the 55dB(A) Lden aircraft noise contour area.

We know that noise has many impacts. A recent report by Barts and the London School of Medicine and Dentistry on the effect of nocturnal noise on health documents the relationship between noise and stress levels, and the impact of aircraft noise on annoyance and irritation. The report states that recent secondary analyses of the London Heathrow sample of children from the RANCH project—the EU project on road traffic and aircraft noise exposure and children’s cognition and health—examined the effects of daytime aircraft noise exposure at home and at school, and concluded that aircraft noise exposure at school had a significant effect on children’s cognitive development and that schools needed to be an important focus for the protection of children from aircraft noise.

Although I have drawn on examples from my local area, the impact of noise is a national issue that affects any airport location. The good practice guide on noise exposure and potential health effects from the European Environment Agency states that 27% of people in the 55dB(A) Lden level areas are highly annoyed by noise, which has implications for irritation, anxiety and stress. Disturbances in the early morning have been proven to have a serious effect on people’s health and well-being. The CAA is the regulator of aviation activity in the UK, but its responsibility for the environmental impact of aviation has been the subject of much debate and will continue to be so. The amendment seeks to ensure that the CAA has some authority to help control the effects of noise and ensure the quality of insulation and mitigation schemes that each of the major UK airports operates in the interests of local residents and the local work force.

The idea is not without precedent; in the United States, airport-related noise insulation schemes are not only regulated, but administered by the Federal Aviation Administration across American airports. The UK has a voluntary system of noise insulation for communities affected by aircraft noise. In Heathrow’s case, the operator, BAA, administers a voluntary scheme that provides noise insulation grants. Good progress has been made under the scheme, and BAA consulted on a new scheme last summer, which we hope will lead to further improvements. Much of the negotiation has taken place, and will continue to do so, between airport operators and local authorities.

I welcome the reporting of environmental impacts by the CAA, which will, in time, lead to greater consistency in monitoring and a more robust evidence base to support dialogue and negotiations between local authorities and airports. However, one of the Bill’s unintended consequences—particularly as it lays open the possibility of inter-terminal competition—may be a lack of clarity about who will be responsible for negotiating with local authorities and under what formula different operators may have different levels of responsibility. Residents who live near airports will not thank us when battles begin about who should be responsible for working with local authorities to help mitigate the effect of aviation on local families.

In the amendment, the Opposition argue that, in addition to a passive reporting role, the CAA’s roles should include those of advisor and referee, and that airport operators’ responsibilities to local communities should be clearly referred to as part of the licence conditions under which they operate. That will help to provide greater clarity and consistency in the principles of noise mitigation schemes, which vary—sometimes rightly, sometimes not—across the country. Clear minimum standards should be set, and local authorities should be given the tools and support to negotiate effectively for the needs of their local communities. I am sure there will still be room for local flexibility on that, including on the specifics of any compensation scheme and on local choice of product.

I thank the Committee for the opportunity to move this amendment. I hope that enshrining such a provision in the licence conditions would enable us to lock in for the future current good practice that might otherwise be watered down or lost as the regulatory regime changes and new systems and priorities are introduced.

Theresa Villiers (Conservative, Chipping Barnet)

I listened with great interest to the hon. Lady’s thoughtful contribution, and I am in no doubt of the need for all airports to consider and properly address their noise impact.

The hon. Lady and I have a great deal of common ground, but despite that there are a number of important reasons why I cannot ask the Committee to support the amendment. Clearly, her constituency is significantly impacted in a positive way by Heathrow, with all the job opportunities, but it is subject to much of Heathrow’s noise impact, too.

First, I do not feel able to support the amendment because it contains a significant technical flaw. Although the amendment seeks to insert a provision on compensation for noise pollution arising from licensed activities, it is not entirely clear on the meaning it attributes to “licensed activities”. I assume that the intention is to refer to clause 68’s definition of airport operation services as “licensed activities,” but clause 68 expressly excludes air transport services from the definition of licensed activities, so it actually excludes flights. If the amendment seeks to allow compensation for noise arising from flights, it could not achieve that as drafted, which is one reason why I do not think it would be wise for the Committee to support it.

A more substantive reason for opposing the amendment is because, as I said in response to amendments tabled by Opposition Front Benchers and to questions during the evidence sessions, environmental protection measures should not depend on whether an airport happens to be subject to economic regulation. If there is a case for environmental regulation, this should depend on the airport’s environmental impact, regardless of whether the airport happens to have substantial market power and fall within the scope of the economic regulation framework set out in the Bill.

Of course, noise is a real concern for many people who live around airports—noise is a particular issue at Heathrow, and the Government’s concern about the noise impact was one of the major reasons for our opposition to building the third runway—but, as the Committee has heard on a number of occasions, I do not feel it is right to rely on the economic regulator to act as a policeman on environmental issues.

We want to see airports making every effort to reduce noise impact and engage constructively with local communities on that, which is why, as we have heard, the Government directly regulate noise at the nation’s three largest airports. That regulation includes restrictions on both day and night noise at Heathrow. At other airports, planning law enables local authorities to introduce restrictions to protect local communities from aircraft noise. For example, a cap may be imposed on the number of flights to and from an airport. The EU environmental noise directive 2002 requires noise action plans to be produced by all airports with more than 50,000 annual movements.

The CAA is bound to consider environmental matters in its work on airspace management, which is separate from economic regulation, including within the future airspace strategy on which it is working with NATS. The Government’s consultation on a sustainable framework for aviation will consider what more can be done to mitigate aviation’s noise impact, as well as many of the issues raised by the hon. Lady today. For those reasons, I hope that she will consider withdrawing her amendment, as it does not achieve the aim she aspires it to. I also feel, as I have said, that using the licensing system is not the best way to deal with the environmental impacts of aviation.

Seema Malhotra (Labour, Feltham and Heston)

I thank the Minister for her response. What is heartening is that the need to deal with the issues of noise and other impacts for local residents is understood. I also recognise her points about technical interpretation of the amendment. Under clause 68,

“the landing and taking off of aircraft”

is referred to, but before that, that clause states that

“‘airport operation services’ means services provided at an airport for the purposes of—”,

so perhaps a discussion could be had later about a better phrasing of the amendment.

Although I take the Minister’s points on board, I think we need to work towards a solution that will stand up nationally. We are not there yet, but I am happy to withdraw the amendment and continue discussions, perhaps looking at introducing a further amendment at a later stage in the Bill. On that basis, I beg to ask leave to withdraw the amendment.

Jim Fitzpatrick (Labour, Poplar and Limehouse)

I hesitate to raise this point now, but I want to ask the Minister a question about licensing. With your indulgence, Mrs Riordan, I will be brief.

I sought some clarification about the CAA’s various licensing responsibilities for airports from the excellent Ms Louise Butcher, whom many colleagues will know as the transport policy specialist at the House of Commons Library in the Department of Information Services. As the Committee will remember, I referred last week to licensed airports; I was unclear about the different airports that would be covered by the licensing arrangements. After asking for clarification from the Library about the different licences, Ms Butcher advised me:

“Licences issued under Part 1 of the Bill are in addition to the operating licence. So, for example, Heathrow would require an operating licence in order to, in effect, be a commercial airport.”

However,

“all commercial airports need an operating licence.”

I would like the Minister to think about what Ms Butcher then suggested:

“I wonder if it might be useful to put down an amendment to the Bill changing references to ‘licence’ in Part 1 to something like ‘regulatory licence’, in order to differentiate it from the general ‘operating licence’?”

That would give greater clarity to the different airports. Perhaps the Minister will reflect on that point, because I think it would tidy up the Bill. That is not a matter on which the Opposition seek to oppose the clause; rather, we ask for clarification, either today or at some point in future.

Theresa Villiers (Conservative, Chipping Barnet)

I am grateful to the shadow Minister for raising that point. It is important, as he says, to distinguish the kind of licences that every airport needs for the purposes of safety and operations from the licences we propose to introduce for the purposes of economic regulation, which would apply only to certain airports passing the tests we have discussed.

I am clear that the Bill provides appropriate separation of the different categories, but I am happy to reflect on what the shadow Minister has said. It is important that the Bill maintain clarity, and although I am content for the moment that clarity is achieved, I will look again in case anything further can be done.

Clause 24 - Appeal to Competition Commission: conditions of new licences

John Woodcock (Labour, Barrow and Furness)

I beg to move amendment 21, in clause 24, page 17, line 10, leave out from ‘whose’ to ‘affected’ and insert

‘financial interests are substantially adversely’.

It is a pleasure to serve under your chairmanship today, Mrs Riordan, and to contribute to the proceedings. The amendment would raise the threshold under which appeals may be made to the Competition Commission against the licence conditions imposed by the CAA in a new licence. We support the principle of the new regime allowing appeals to be brought via the Competition Commission, rather than requiring judicial review, but we wish to ensure that effective safeguards are in place against the appeals process being used in a frivolous or vexatious manner.

Under the Bill as it stands, an appeal may be brought under any circumstances by the holder of the licence—the airport owner—and by providers of air transport services

“whose interests are materially affected by the decision”.

During pre-legislative scrutiny, a number of airport operators and their representatives argued that the appeals process should be balanced and that appeals against licence conditions by airlines should not be too numerous or effectively become a reflex reaction to every licence granted. In oral evidence to the Committee, Members will recall that Emma Gilthorpe, the director of regulation at BAA Airports Ltd, suggested that there was a risk of appeals being quite numerous under the Bill as it stands. She said that at Heathrow, with a revenue turnover of £1 billion each year through airlines, even small changes in the price control system would lead to an airline being considered as materially affected, thus potentially triggering an appeal.

A similar point was made by Gatwick Airport Ltd in its written evidence to the Committee. It pointed out that the Bill does not define “materially affected”. It wrote:

“virtually all airlines operating (or potentially operating) at a particular airport could argue that they have a material interest in the airport’s licence conditions, particularly those which related to price controls”.

Gatwick also points to the Competition Commission’s own recommendation. It expressed concern that a system in which numerous unmeritorious appeals are pursued increases the burden on the regulated company and increases the risk of the Competition Commission effectively becoming the regulator of the system. As I am sure the Minister agrees, it would be deeply counter-productive to the principles of the Bill, which we support, if, because of an imperfectly specified appeals process, an attempt to shift regulatory powers to the CAA shifted power to the Competition Commission instead.

The Airport Operators Association also raised concerns, saying that it was unclear under the proposed system what the motivation would be not to appeal, and adding:

“it is not difficult to foresee a situation where appeals become habitual, because they represent a risk-free opportunity to secure a better commercial outcome for appellants.”

Such a scenario raises the potential for a regulatory logjam of appeals, slowing the process of investment in improving airports, to the long-term detriment of passengers and freight shippers. The Select Committee agreed with airports’ concerns on this issue, calling on Ministers to ensure that the Competition Commission has adequate powers to strike out vexatious and frivolous appeals. In particular, it recommended that the Government should specify more clearly what constitutes a “materially affected” air transport operator. We are concerned that Ministers have chosen not to accept that recommendation. Our amendment would establish a much stronger test of which air transport operators could lodge appeals, requiring that they be operators whose

“financial interests are substantially adversely”

affected by the new licence conditions. The amendment would prevent vexatious or frivolous claims from operators that would be only marginally affected by licence conditions. It would prevent large numbers of airlines at a given airport from introducing co-ordinated appeals and would discourage appeals based on hypothetical air operations. The proposed wording leaves plenty of scope for genuine and warranted appeals, while limiting the potential for regulatory gridlock, so we hope the Minister will be able to accept it.

Graham Stringer (Labour, Blackley and Broughton)

I want to speak to amendment 5, which is in my name and that of my hon. Friend the Member for Bolton West—

Linda Riordan (Labour, Halifax)

Order. We will come to that amendment later. We are dealing purely with amendment 21.

Theresa Villiers (Conservative, Chipping Barnet)

Thank you, Mrs Riordan. I am sure that the Committee will wait with bated breath for the contribution of the hon. Member for Blackley and Broughton, who raises an important point in amendment 5 that we will be able to debate later.

I am grateful to the hon. Member for Barrow and Furness for raising the issue and for giving us a chance to debate one of the most important aspects of the Bill. If I may trespass on your patience for a little longer than usual, Mrs Riordan, I would like to explore some of the broader issues relating to the appeals process, because it is crucial.

For both technical and substantive reasons, I cannot support the amendment. At the technical level, I question why it has been tabled to clause 24(2)(b) but not clause 25(2)(b), which contains the same phrasing. Accepting the amendment would create an unjustified and irrational inconsistency between the grounds on which an appeal could be made regarding the conditions of a new licence, and those on which an appeal could be made against the modification of licence conditions.

I do not accept the heart of the argument put forward by Opposition Front Benchers, and nor do I believe that a case has been made for the concept of “materially affected”, which the amendment seeks to delete, being problematic to apply in practice. Whether someone is materially affected by a decision is a question of fact for the Competition Commission to decide. The concept of something being “material” is used in many other legal contexts without giving rise to problems of predictability and consistency. For example, under the Electricity and Gas (Internal Markets) Regulations 2011, permission to appeal may be refused by the Competition Commission where a person is not materially affected. The terms “material”, “material change”, “material circumstance”, “material considerations”, and so on, have all previously been used in statutes, and the term has been used in legislation since at least 1906. A recent example can be found in section 897(2)(b)(i) of the Companies Act 2006, which refers to the

“material interests of the directors of the company”.

A further reason for the Committee to oppose amendment 21 is that it would have a negative impact on the effectiveness of the reformed system of economic regulation proposed in the Bill. It would be a significant and fundamental change. I must say that I see a surprising inconsistency in the Opposition Front-Bench team’s position. They were adamant last week that airlines were effective representatives of passengers and should have an important role in the regulatory system, and they tabled amendments to that effect. Now, however, they are seeking to dilute what is probably the most important right that the Bill grants to airlines—one that I believe airlines will be able to use effectively to defend their interests and, crucially, the interests of passengers.

As Committee members will probably be aware, the Bill draws on work going back some years, including the Pilling report, the Cave review and various consultations under the previous Government. There is no doubt that the appeals process has been the subject of lively debate throughout the deliberations that have led the Government to where we are today and the Committee to this amendment.

The shadow Minister has alluded to the dilemma that the Government faced on the kind of appeal rights to grant: on the one hand, we want a balanced and fair system that will be effective in holding the CAA to account for its decisions and the impact of those decisions on passengers; and on the other hand, it would be unwise, and it would not be right, to create such broad appeal rights that we end up with a slow and expensive two-tier decision-making system of the sort outlined by the hon. Member for Barrow and Furness.

Various options were considered, including vesting a right of appeal in airports and the Secretary of State, to ensure that we do not end up with a two-tier system. The airlines were concerned about that, but, to their credit, they took a constructive approach by proposing a number of ideas and working hard to develop an effective but constrained right of appeal that balances the competing concerns that I have outlined.

After extensive engagement with different stakeholders, including airlines, a more powerful right of appeal than the judicial review options available under the current system was included in the Bill—I welcome the shadow Minister’s supportive approach to that—but that powerful right of appeal is still limited in important ways to ensure that it cannot be used to clog up the decision-making process unreasonably. The right of appeal is available only to materially affected airlines, for example, but it is also constrained in other ways: an appeal does not suspend a licence condition, except in some limited and defined circumstances; and appeals are adjudicative, rather than investigatory.

John Woodcock (Labour, Barrow and Furness)

I thank the Minister for attempting to address the issues I laid out in the amendment, but what does she think of our concern about materially affected airlines? In our example of Heathrow, a fairly minor change could materially affect every airline in the place and lead to a logjam. She needs to address that key point.

Theresa Villiers (Conservative, Chipping Barnet)

That is a timely intervention. Not only does constraining the right of appeal to materially affected airlines provide a safeguard, because it limits the scope of the appeal process, but we have also included a number of additional safeguards in the Bill to address exactly the sorts of concerns raised by the hon. Gentleman. I will outline those safeguards, but there will be a further opportunity later to debate those safeguards in more detail.

Appeals will be adjudicative, rather than investigatory, which is an important restriction. The process will also be subject to strict time limits, and the Competition Commission may make an order for costs following its decisions, so an appeal will not necessarily be an entirely risk-free option. As I have said, the proper place for detailed debate on such concepts is probably during our consideration of later amendments, but if the Committee adopted the amendment, it would destabilise a carefully constructed compromise package on appeals that now commands significant support.

In its written evidence to the Committee, easyJet states:

“Airlines can play a…constructive and effective role through participating in an appeal process, not just initiating one.”

Virgin’s written evidence notes:

“Virgin Atlantic has consistently supported the proposals for the Competition Commission to become an appellate body for CAA decisions, subject to the caveat that all parties with a material interest are granted the right to appeal.”

Nigel Mills (Conservative, Amber Valley)

I would not like to miss the Minister before she concludes her response. The Committee will not be too surprised to learn that my question is purely semantic and technical. Clause 24(1) refers to clause 15, which lists the draft licence conditions. Clause 15(2) refers to a person as being the “applicant for the licence”, whereas the reference in clause 24 is to the “holder of the licence”. Can the proposed operator hold a licence before the licence has been granted and comes into force or should we still refer to the “applicant” rather than the “holder”?

Theresa Villiers (Conservative, Chipping Barnet)

As ever, my hon. Friend’s eye for detail is second to none. I may take some advice on that and respond to him a little later, as I have to confess I am not entirely sure of the answer.

In conclusion, I would argue that there is no need to remove “materially affected” from subsection (2)(b) because a range of other important safeguards are in place to prevent abuse of the appeal right system, some of which I have set out. A further safeguard is provided by clauses 24(5) and 25(5). As the shadow Minister pointed out, those two subsections provide that the Competition Commission may refuse permission to appeal on the grounds that the appeal is trivial or vexatious, or has no reasonable prospect of success. So the Bill gives the Competition Commission the power to stop an appeal in its tracks if it has no merit and no prospect of success.

As drafted, clause 24 gives important rights to airlines to hold the regulator to account in relation to decisions that may have a significant impact on their businesses and their passengers. I do not believe that the Opposition made the case for the significant restriction in airline appeal rights, so I hope that, given this reassurance, they will withdraw the amendment—if they do not, I would have to ask my colleagues to oppose it.

John Woodcock (Labour, Barrow and Furness)

I thank the Minister for that response, but we remain concerned and we will need to reflect on this. I hope that she will, too, given the substantial issues that we have set out today. Although I reserve the right to come back to this later, I beg to ask leave to withdraw the amendment.

Graham Stringer (Labour, Blackley and Broughton)

I beg to move amendment 5, in clause 24, page 17, line 19, at end add ‘, or

(c) that the appeal, if granted, would have effects inconsistent with the duties of the CAA under Section 1.’.

Linda Riordan (Labour, Halifax)

With this it will be convenient to discuss amendment 22, in clause 25, page 17, line 34, at end insert—

‘(ba) that the appeal, if granted, would have effects inconsistent with the duties of the CAA under section 1, or’.

Graham Stringer (Labour, Blackley and Broughton)

I apologise for jumping the gun previously; I thought we were taking these two amendments together, but I was in error.

I agree with the basic changes being made here. As my hon. Friend the Member for Barrow and Furness said, relying on judicial review to get decisions is not a sensible way to run an airport. It is sensible to have an understood and thought-through appeals process. I also think that in defining the appeals process in clause 24 we come to some of the problems, ambiguities and, perhaps, even contradictions that arise when the Bill switches its focus from what happened previously, when the interests of the airlines were what needed to be considered. As that has changed to the interests of the passenger and freight user, we have arrived at a half-way house, which could lead to some problems in future.

The amendment says that

“the appeal, if granted, would have effects inconsistent with the duties of the CAA under Section 1”.

In other words, an appeal would not be allowed if it was in conflict with the duties defined in clause 1, which are effectively the interests of the passenger and the freight user. What troubles me, which is why I tabled the amendment, is what has troubled me on previous amendments. I can find no definition in the Bill—if there is one I should be grateful if the Minister could tell me—of what the passengers’ interests are.

It has been clear from previous arguments and discussions between airlines and airports that the interests of low-cost carriers—including the most aggressive low-cost carriers, such as Ryanair—are very different from those of American Airlines, British Airways, Delta or Singapore Airlines, which want to provide a quality experience. Both types of airlines are materially affected by the licensing arrangements, but they would have very different views on the definition of the interests of the passenger. Put simply, Ryanair wants things cheap and cheerful: it wants costs to be as low as possible, and passage through the airport and the other services to be as quick as possible. British Airways, however, may want a much more sumptuous, lavish experience for their first and business-class passengers. How is the Competition Commission expected to decide between Ryanair, which may appeal on one basis when it is materially affected, and, say, Singapore Airlines, which may be affected in a different way, where this is all leading to the same licensing conditions? I find it difficult to imagine how the Competition Commission would approach that.

The judicial review process was a procedural one; if an airport was taking decisions in an unreasonable way, without taking account of the facts and without consulting properly, it would lose the judicial review. These are a different set of criteria that do not define the freight user’s interest or the passenger’s interest, which lies at the very heart of this Bill. I am increasingly worried that if those interests are not defined, the Competition Commission will not have good guidelines on which to make its decisions. That is my problem, which is why I have tabled the amendment. I want to understand how the Government intend to make sure, when airlines or air users appeal, that the interests of the passenger and the freight user are paramount.

Theresa Villiers (Conservative, Chipping Barnet)

I am grateful to the hon. Gentleman, as ever, for his remarks and for the opportunity to debate the amendments. As with many debates in Committee, I understand and sympathise with the aim of the amendments but I do not feel that they are necessary and I hope to convince the Committee that the Bill deals with the points they raise. I will deal specifically with the amendments before I touch on the broader issues that the hon. Member for Blackley and Broughton raised.

Our aim is to establish an appeals process that facilitates transparency, accountability and the timely resolution of appeals. As we have discussed this morning, clauses 24 and 25 provide that permission to appeal should be granted only where appropriate. The amendments would not change how the Bill works in practice; in effect, they would be empty provisions, because clause 30 substantially delivers the outcome that they seek.

Subsections (2), (3) and (4) of clause 30 provide that the Competition Commission be subject to the clause 1 primary duty to passengers when deciding an application for permission to appeal under clauses 24 and 25; determining such an appeal, including taking decisions and giving directions under clause 27; and deciding an application for permission to intervene. The granting of a direction to suspend a licence is governed by slightly different criteria.

I hope I can reassure the hon. Member for Blackley and Broughton that the combined effect of clause 24(5)(b), clause 25(5)(b) and clause 30 ensure that the Competition Commission is subject to the primary duty in clause 1 when deciding whether permission to appeal a licence condition or licence modification should be granted. I recognise, however, that the hon. Gentleman has raised wider issues about how the regulatory structure will address the interests of end users. I fully acknowledge that, at times, the interests of different passenger groups will contrast, and they will aspire to different outcomes as they travel through the airport.

Last week, we debated that point in relation to the interests of present and future passengers, so there is no doubt that the CAA, in its decisions, and the Competition Commission, when considering appeals, will need to think intelligently about how to balance and deal with such conflicting interests. I believe that the CAA has the capacity to balance the interests of different groups, as provided for in clause 1(5), which we debated last week.

There is no single right answer that the Committee can give as legislators about the decisions that the CAA might take, in terms of how to deal with conflicts between the interests of different passengers. It is good practice, however, to vest such decisions in an independent, expert regulator, with the maximum flexibility to ensure that we have a regulatory system that is responsive to passengers and promotes their interests, but does not impose unreasonable or unnecessary costs on our airport sector. With that, I hope the hon. Gentleman will consider withdrawing the amendment.

John Woodcock (Labour, Barrow and Furness)

I apologise if the order of contributions is slightly unconventional; I probably should have been quicker on my feet. Amendment 22 uses the same text as amendment 5, tabled by my hon. Friends the Members for Blackley and Broughton and for Bolton West, but for a different—although I would say complementary—reason.

Given the concerns that we have discussed about the potential for vexatious or frivolous appeals over new licences, it is right that we should look to ensure that appeals on the modification of licence conditions should be suitably regulated. In particular, we believe that there is a strong case that the appeals mechanism should reflect the primacy of the duties that the Bill and previous Bills have placed on the CAA. We strongly support the Bill’s aim to orientate the CAA’s duties towards using economic regulation to promote airport users’ interests and towards promoting competition in the provision of airport operation services, along with the secondary duties, set out in chapter 1 of the Bill, which include ensuring the licence holder’s ability to finance their operations, promoting economy and efficiency on the part of licence holders, and meeting international obligations.

Given the importance of those duties, it could be a remarkable waste of time and resources if appeals were permitted against licence conditions intended to bring the CAA within those duties. Following the Bill’s passage, new and amended duties imposed on the CAA could require a significant number of licence modifications over the coming years, to bring the CAA’s operations in line with those duties. It could be damaging to the interests of passengers and freight shippers—as well as being contrary to the will of the House—if such modifications were then subject to lengthy and repeated appeals by either airports or airlines.

The amendment seeks to provide the Competition Commission with additional grounds to refuse an appeal request, permitting it to judge that should the appeal be granted, it would place the CAA in breach of its duties, as set out in the Bill. By proposing the amendment, we are seeking not only to protect the interests of airport users, but to provide additional force to the duties rightly placed on the CAA by the Bill.

Theresa Villiers (Conservative, Chipping Barnet)

I am grateful to the shadow Minister for his comments. I do not think that I need to add to what I have already said. Clause 30 delivers what the amendments intend, so I urge the Committee to reject them if the Opposition put them to a vote.

John Woodcock (Labour, Barrow and Furness)

I do not feel that that response answers my point, and I do not know whether my hon. Friend the Member for Blackley and Broughton will accept it. However, we will not push the matter to a vote at this stage; we will go away and reflect on it.

Graham Stringer (Labour, Blackley and Broughton)

I thank the Minister for her reply. She has dealt comprehensively with my technical points by pointing me in the direction of clause 30, which defines the primary objectives. The Minister could reflect further, however, on more definition to help the Competition Commission with what the interests of freight users and passengers may be.

One obviously cannot anticipate every particular appeal and advise the Competition Commission on what it should do in each situation. On the other hand, leaving the Competition Commission without any adequate definition of what the interests of freight users or passengers might be is probably leaving it with too much work and may lead to some perverse consequences.

I am happy to withdraw the amendment, particularly as the technical points have been answered completely, but I ask the Minister to reflect further on whether more definitions are needed in the Bill.

Theresa Villiers (Conservative, Chipping Barnet)

I am grateful for the hon. Gentleman’s further remarks. As I have said many times, he has great expertise in these matters. However, I continue to believe that it would be wrong for us to “hard code” into the Bill a particular definition of exactly how the end user is best served. It is better to give the CAA broad discretion and to leave it up to the Competition Commission to make sensible decisions on the basis of the constraints already set out in the Bill in relation to the appeals framework.

However, there is a route for ministerial input into the process as a whole, because clause 2 provides for the Secretary of State to issue guidance to the CAA that may be of assistance when it makes decisions under the primary duty. There are non-legislative options to provide further guidance to the CAA in the future, so that may be useful when it makes decisions on the end user’s interests.

Linda Riordan (Labour, Halifax)

Mr Stringer, can you confirm that you want to withdraw the amendment?

Graham Stringer (Labour, Blackley and Broughton)

I beg to ask leave to withdraw the amendment.

Clause 26 - When appeals may be allowed

John Woodcock (Labour, Barrow and Furness)

I beg to move amendment 36, in clause 26, page 18, line 10, leave out paragraph (c).

Linda Riordan (Labour, Halifax)

With this it will be convenient to discuss the following: amendment 48, in schedule 3, page 87, line 41, leave out sub-sub-paragraph (c).

Amendment 49, in schedule 3, page 88, line 21, leave out sub-sub-paragraph (c).

Amendment 50, in schedule 3, page 88, line 39, leave out sub-sub-paragraph (c).

Amendment 51, in schedule 3, page 90, line 6, leave out sub-sub-paragraph (c).

John Woodcock (Labour, Barrow and Furness)

Before the Committee loses the will to live at the sight of all these amendments, I should explain that they are simple, probing amendments that would achieve the same thing.

We question the basis on which the Competition Commission will decide that the “exercise of a discretion” is wrong before the appeal has been granted. To decide what was wrong in any instance would surely be a judicial process that would require evidence and representations from both sides of the argument. Will all interested parties be able to make representations to the Competition Commission before it allows an appeal to be granted under 26(c)? Will a party asking the Competition Commission for an appeal under 26(c) have to inform other interested parties of the grounds of their appeal in order to provide evidence?

Theresa Villiers (Conservative, Chipping Barnet)

The hon. Gentleman asks some specific points about the procedure in relation to paragraph (c), but it is important to address the issues raised by the amendment he has tabled—namely, the deletion of that paragraph.

The amendments seek to reduce the grounds on which an appellant could make an appeal to the Competition Commission against licence conditions and modifications of licence conditions. Although I welcome the opportunity to debate this important issue, for reasons similar to those I set out in relation to the last group, I am concerned that the amendments would damage the carefully constructed appeals process that the Government have included in the Bill.

I welcome the acknowledgment that these are probing amendments; it was helpful and constructive of the hon. Gentleman to make that clear. Even so, there are some technical problems with them. The amendments seek to remove many references to the phrase

“the decision was based on the wrong exercise of a discretion”,

but they do not delete it entirely from the Bill. My concern goes beyond technical matters, important though those are in a complex area of policy. As with the previous group, the Opposition seek to reduce the effectiveness of the right of appeal. I consider that narrowing the right of appeal in this way is not necessary and might harm the ability of airlines to defend the interests of their passengers.

As we have already discussed, the Bill builds in a number of constraints on the appeals process. These include giving the Competition Commission the power to refuse permission to appeal where the grounds are trivial or vexatious or have no reasonable prospect of success. But the three grounds of appeal in clause 26(2) also play an important part in ensuring that the appeals system provides effective redress for airlines without enabling it to be used unfairly to disrupt the decision-making process or displace the CAA as the regulator.

The three grounds (a), (b) and (c) already present a relatively high test to applicants wishing to appeal. To remove paragraph (c) would make it even more difficult to appeal successfully. I appreciate that Opposition Members do not wish to see CAA decisions disturbed where there is no good reason—indeed, none of us wants to give appellate bodies powers that are too broad when it comes to overturning decisions by the CAA. However, appeals that have merit should be heard if airlines are to play an effective role in defending the interest of passengers.

The three grounds in subsection (2) are widely used in appeals procedures in much of the English legal system. They are based on civil procedure rules that govern appeals from lower courts to higher courts. It is worth noting that the third ground, which the amendment seeks to delete, will not be established merely if the appeal tribunal would have taken a different approach from that of the CAA if it had been the decision maker; rather, it would apply where the Competition Commission is satisfied that the CAA has exceeded the generous ambit within which a reasonable disagreement is possible. Put simply, if there is more than one reasonable outcome, the CAA’s decision cannot be overturned simply because the Competition Appeal Tribunal would have come to the conclusion that a different outcome was the better option.

The adjudicative nature of the appeal rights is an important means of preventing the kind of two-tier decision making that we debated in relation to the previous amendment. We have not introduced an investigative appeal process where an appeal body would in effect retake the decision, substituting its own views for those of the CAA. The purpose of limiting the scope of the Competition Commission’s powers is to prevent it from simply taking a fresh decision on the basis that it prefers a different approach. I cannot accept the amendments because I believe they would destabilise an appropriate balance between regulatory certainty and preserving the CAA as the regulator, and the need to correct injustice where errors occur.

I will take advice on the points that the hon. Member for Barrow and Furness made about the procedures to be applied and the scope of third parties to take part in the appeals process, and I will get back to him. I do not have the answers in front of me because those points are not directly relevant to the amendments, but I am happy to look into those matters and come back to him.

John Woodcock (Labour, Barrow and Furness)

That is fine. On that basis, I beg to ask leave to withdraw the amendment.

Clause 27 - Determination of appeal

John Woodcock (Labour, Barrow and Furness)

I beg to move amendment 37, in clause 27, page 18, line 19, leave out ‘and any directions given by the Commission’.

Linda Riordan (Labour, Halifax)

With this it will be convenient to discuss amendment 38, in clause 27, page 18, line 33, leave out ‘other than the CAA’.

John Woodcock (Labour, Barrow and Furness)

Amendments 37 and 38 are probing amendments. In amendment 37, the Opposition seek to question the directions that the Competition Commission can give. Can it, for example, direct the CAA to ignore evidence or representations from interested parties that have been granted an appeal? I hope that the Minister will explain the full extent of the directions that the Competition Commission can give, and where that is set out. That is important, because clause 27(6) states that anyone who is given directions by the Competition Commission must comply with them.

I hope that the Minister will also be able to explain the scenarios in which the Government envisage that the directions in subsection (2)(b) will be more appropriate than those in (2)(c). For example, when an appeal is granted, when would the Competition Commission remit the matter to the CAA for reconsideration, as set out in (2)(b), and when would it substitute its own decision for that of the CAA, as set out in (2)(c)? The Competition Commission’s power to substitute its own decision for that of the CAA needs further explanation, because subsection (4)(a) gives the commission the power to give directions to the CAA even though it has already substituted its own decision for that of the CAA.

The purpose of amendment 38 is to question why the CAA will be exempted from the enforcement action that clause 27(7) allows through the courts in relation to appeals to the Competition Commission regarding licence conditions. I hope that the Minister will explain why that is the case when the Bill provides that all other parties are liable to enforcement action through the courts.

Theresa Villiers (Conservative, Chipping Barnet)

Clause 27 sets out what the Competition Commission must do once it determines an appeal on a licence condition. We are talking about the results of the appeal. Where the appeal is allowed, in whole or in part, subsection (2) gives the Competition Commission three options: to quash the decision taken by the CAA; to remit the matter to the CAA for reconsideration; or to substitute its own decision for that of the CAA. The second of those three options—remission back to the CAA for a fresh decision—is the focus of amendment 37.

The Bill provides that when the CAA makes the decision again, it must comply with directions given by the Competition Commission. Amendment 37 proposes to remove the obligation to comply with the commission’s directions.

I have listened carefully to the arguments of the shadow Minister, but I am not persuaded to support the amendment; I am grateful for the indication that it is more of a probing amendment than one that will be pressed to a Division. I am not entirely sure that I understand exactly the rationale behind the amendment—indeed, the Opposition appear to accept that the Competition Commission should be the appellate body for appeals against decisions on licence conditions. If they did not, I would have expected a lot of amendments to delete that role.

If one accepts that the Competition Commission is an appropriate appeals body—as I have said, many stakeholders, particularly the airlines, have welcomed the new appeals rights that the Bill grants—I can see no good reason for preventing the CC from giving directions to the CAA when it has decided an appeal. I do not think it would be right for the Bill to state exactly what those directions might include. There is merit in giving flexibility to the Competition Commission to decide for itself what directions are appropriate within the constraints of the framework provided by the Bill, some of which we have already considered—namely that, in making many of its decisions, it is obliged to have regard to the primary duty.

I hope that sets out my response to the specific matters raised by the shadow Minister. This type of procedure works well in many other regulatory contexts, so there is no need to include in the Bill examples or specifics as to what the Competition Commission’s directions might be. The commission itself has agreed that giving it the ability to remit the matter to the CAA is important, and it is well aware that there may well be cases where it is more appropriate for the CAA to re-decide the matter in the light of the appeal to the Competition Commission. One of the key practical problems with the amendment is that without CC directions, the CAA’s reconsideration and decision could be more susceptible to another appeal.

In my view, the option to remit the matter back to the CAA, with directions to be taken into account when the CAA makes a fresh decision, provides a useful flexibility, and it would be unfortunate to remove that from the Bill. If it were deleted, that would probably lead to more instances where the Competition Commission would go for the option available in subsection (2)(c) and substitute its own decision for the CAA’s. I do not believe that is what the Opposition are intending, so I hope that the amendment remains just a probing one.

When preparing for today’s debates, I was unsure about the objective of amendment 38. It seeks to amend subsection (7), which provides that directions from the CC, given under clause 27, can be enforced in the same way as an order of the High Court or Court of Session against anyone other than the CAA. As we have heard from the shadow Minister, the amendment deletes the exemption for the CAA, which means that the CAA could be pursued through the courts as if in breach of a court order if it did not comply with a direction from the Competition Commission.

There are significant technical flaws with amendment 38. Clause 27(6) requires a person to whom a direction is given to comply with it, so if the CAA failed to comply with a lawful direction from the CC, it would be acting unlawfully. The Bill’s drafting is based on a precedent: section 175(8) of the Energy Act 2004 provides that directions, other than directions given to the Gas and Electricity Markets Authority, are enforceable as if they were orders of the High Court.

One of the reasons why an express sanction, such as that outlined in clause 27(7), is not needed for the CAA is the availability of judicial review. As a public body discharging public functions, judicial review, even without an express statutory remedy, could compel the CAA to comply with a lawful direction. Where a direction is given and a matter is remitted to the CAA for reconsideration, failure to comply with the direction may form part of a subsequent appeal to the Competition Commission.

Where a direction is given in circumstances in which the Competition Commission substitutes its decision for that of the CAA, no further appeal is possible under chapter 1. So in this case, judicial review would be possible. Accordingly, although the obligation may not be enforceable as if it were an order of the High Court or the Court of Session, as provided for persons other than the CAA, compliance could be obtained through the appeals system or the courts, under judicial review, as appropriate.

I hope I have reassured the shadow Minister that, although the CAA is specifically excluded from subsection (7), that does not mean that directions cannot be enforced against it.

John Woodcock (Labour, Barrow and Furness)

On that basis, I beg to ask leave to withdraw the amendment.

Clause 28 - Determination of appeal: time limits

John Woodcock (Labour, Barrow and Furness)

I beg to move amendment 39, in clause 28, page 18, line 40, leave out ‘24 weeks’ and insert ‘12 weeks’.

Linda Riordan (Labour, Halifax)

With this it will be convenient to discuss amendment 40, in clause 28, page 19, line 32, leave out subsection (9).

John Woodcock (Labour, Barrow and Furness)

I have two more probing amendments, both of which address time scales.

I hope the Minister will use amendment 39 to explain why the Competition Commission is to be given 24 weeks to make a decision on an appeal, when an appellant has only six weeks to submit an appeal after the CAA makes a decision, as set out in paragraph 1(1) of schedule 2. The amendment would shorten the period given to the commission. If the Minister does not want to accept the amendment, I hope she will explain why the commission is currently slated to get quadruple the time that an applicant will receive to make a decision.

Amendment 40 probes subsection (9), which gives the Secretary of State the power by regulation to modify the time periods set out for appeals in respect of licence condition decisions by the CAA. I hope the Minister will be able to set out the steps she thinks she will be able to take to ensure that that power does not create uncertainty for all parties involved.

Theresa Villiers (Conservative, Chipping Barnet)

As I hinted during discussions about previous amendments, the time limits have been designed to provide certainty to parties throughout the appeals process and to provide for timely determination of appeals. Again, as with other aspects of the appeals mechanisms, we have based many of our proposals on other regulatory systems.

The appeals process in the Bill is based on the Electricity and Gas (Internal Markets) Regulations 2011. Under that regime, the Competition Commission must determine an appeal against a price control decision within six months and an appeal against any other decision within four months.

We support the prompt resolution of an appeal and believe that 24 weeks is an appropriate period within which to expect the Competition Commission to determine an appeal. We want appeals to be dealt with in a timely manner, but that must be balanced against the practicalities of the time needed to ensure that justice can be done and a decision taken properly and appropriately.

If amendment 39 were accepted—I am grateful for the indication that it is a probing amendment—there is a risk that full consideration would not be possible within the shortened time period, and that we would end up with poorer-quality decision making as a result. Judicial review would be a possibility as well. The Competition Commission has confirmed to the Department for Transport that it thinks that 12 weeks would be too short a period to consider evidence from the party, test the evidence and reach a well-reasoned and robust determination. The possible impact on justice could have obvious consequences for fairness.

The shadow Minister asked about the distinction between the CC’s 24-week process and the six-week deadline placed on appellants, but we need to consider the six-week deadline in the round. He himself called for care to be taken not to make the appeals process overly complex, too long or too expensive. We think a degree of strictness is important in relation to time limits—not too long, and not too short.

Although the six-week timetable is potentially demanding for appellants, the CAA is under obligations to consult on licence conditions before making its determination, so groups that want to appeal, such as airlines and so on, have a significant amount of visibility about the terms of the licence condition well before the clock starts ticking on the six weeks. It is not as though appellants start from zero and have to put together their entire appeal in six weeks. In reality, they will have known for some time the proposed content of the licence, as a result of consultation.

If the CAA decides to make a big change to the licence condition on which it has consulted, it will often be obliged to consult again. We must consider the six-week deadline in the context of where it appears in the process overall and of the other safeguards that the Bill provides to ensure that potential appellants are treated fairly.

I return to the specific concerns about the 24 weeks. It would have practical consequences if we were significantly to constrain the time available for the CC to make its decisions. There would be a risk of further appeals and judicial review applications, protracting the process in a way that I am sure Opposition Front Benchers would agree was not attractive.

The 24 weeks is part of the package of proposals put together after extensive debate with stakeholders and designed for appropriate balance between a timely and efficient process and one that enables airlines effectively to hold the CAA to account and defend passengers’ interests. The amendments, like others that we have discussed, could destabilise that balance. Indeed, some concern has been expressed that the time limits in the Bill are overly strict, so I cannot see a cogent case for shortening the time limits as the hon. Member for Barrow and Furness proposes.

The hon. Gentleman asked, in relation to amendment 40, what constraints or care the Government would take to ensure that the power to produce delegated legislation under the clause would not cause unnecessary uncertainty. As I said, I think that we have the right balance in the appeals process package as a whole, and I am confident that the time limits that we have proposed are workable and right. However, it makes sense to retain the option to amend them via secondary legislation, as provided for in subsection (9).

As we want this legislation to last, we feel that it would be prudent to retain some flexibility to adjust those time periods if experience proved that that would be desirable. The Competition Commission agrees that that is a useful power for the Secretary of State to have and appropriate for secondary legislation. Enabling the Secretary of State to modify the periods of time specified in the clause eliminates the need to use primary legislation should processes change and experience prove that a change to the appeal time limits is necessary.

Of course, in making such decisions, the Secretary of State would take care and would be subject to the ordinary parliamentary processes that are applicable in relation to secondary legislation, and, where necessary and appropriate, would undertake consultation as well. I do not think that that would inject unnecessary or unacceptable uncertainty into the framework set out in the Bill. I hope that the shadow Minister has received reassurance on the time limits.

John Woodcock (Labour, Barrow and Furness)

I beg to ask leave to withdraw the amendment.

Clause 29 - Determination of appeal: publication etc

John Woodcock (Labour, Barrow and Furness)

I beg to move amendment 41, in clause 29, page 20, line 13, leave out ‘may’ and insert ‘must’.

This is another probing amendment. I hope that the Minister can quickly clear this matter up and provide reassurance on the wording. We are concerned that, as it stands, there could be a scenario in which the Competition Commission could, in theory, argue that it would be right to publish commercial information that could harm legitimate business interests, as set out in clause 29(5)(a). We cannot envisage any scenario in which that would be acceptable, so why is the legislation so drafted? Why not make things clearer by ruling the possibility out by using the phrase “must not publish”?

Theresa Villiers (Conservative, Chipping Barnet)

The intention of the drafting is to enable the Competition Commission to balance the public interest in disclosure against the potential damage to the private interest if disclosure is made. It is the sort of dilemma with which many bodies across the public sector and Government deal with regularly. There may be cases where there is an overwhelming public interest in disclosing information and where relatively minor damage would be done to a private party, or where the damage done to a private party is secondary. By way of reassurance, I should say that the same provision can be found in the regime for regulating electricity and gas, and it does not appear to have caused problems.

We believe that it is appropriate that the Competition Commission should be left with the discretion outlined in the clause. I have no reason to believe that the commission would act irresponsibly or unreasonably in exercising that discretion, whereas the inflexibility introduced by amendment 41 could prevent the disclosure of information of significant public interest.

John Woodcock (Labour, Barrow and Furness)

I accept what the Minister has said so far, but can she give any reassurance on what redress mechanisms would exist if the Competition Commission were to act irresponsibly and publish when there was not an overwhelming public interest? We can assume that it would be a difficult and contested matter if such an occasion were to arise.

Theresa Villiers (Conservative, Chipping Barnet)

Ordinary judicial review would certainly be available. If the Competition Commission were proposing to publish information that the parties involved considered sensitive and confidential, so that the commission should not use its discretion under the clause to publish, they could seek judicial review of that decision. If necessary, they could presumably seek injunctive relief to prevent publication and use the court system in that way, so they would not be entirely without redress.

I am slightly surprised; Oppositions generally press for more transparency, and there is a case for leaving the discretion up to the Competition Commission. That occurs in other regulatory sectors and has not caused problems. We can be confident that the Competition Commission will exercise the discretion in a responsible way and with proper regard to the legitimate interests of third parties. With those comments, I hope that the hon. Gentleman will withdraw the amendment.

John Woodcock (Labour, Barrow and Furness)

I beg to ask leave to withdraw the amendment.

Schedule 2 - Appeals under sections 24 and 25

John Woodcock (Labour, Barrow and Furness)

I beg to move amendment 42, in schedule 2, page 69, line 22, leave out ‘could have been raised by the applicant or a relevant connected person’ and insert ‘have been raised by the applicant’.

Linda Riordan (Labour, Halifax)

With this it will be convenient to discuss amendment 43, in schedule 2, page 69, line 25, leave out subsection (6).

John Woodcock (Labour, Barrow and Furness)

We have two more probing amendments that I hope we can deal with relatively briefly. By deleting “could” from paragraph 2(5)(b) of schedule 2, amendment 42 would have the effect of the Competition Commission being able to exclude an appeal only if the matter had already been raised in a previous appeal. If the Government want to draw exclusions wider than that, I hope they will set out why that is correct.

Amendment 43 would remove paragraph 2(6) of schedule 2 and with it the references to a “relevant connected person”, because we are concerned that the current wording is too broad and there could be a good case for its refining. For example, does that mean any person with a personal or commercial link? Does the Minister envisage that no such differentiation would be made? If she thinks that such differentiation should exist, would she consider tightening the wording of the legislation?

Theresa Villiers (Conservative, Chipping Barnet)

I welcome the hon. Gentleman’s comments. As we have heard, amendment 42 seeks to remove the power from the Competition Commission to exclude matters that could have been heard by a previous appeal. The relevant scenario is where a first appeal results in the matter being remitted back to the CAA, under clause 27(2)(b), which then repeats the licence modification process, as under clause 22, and then another appeal is made. Amendment 42 is unnecessary and I hope that I can provide the shadow Minister with the reassurance that he wants about the rationale for the approach taken in the Bill.

In short, we want to encourage the appellant to produce the best case the first time, which is another element of our efforts to ensure that unnecessary expense is not incurred as a result of avoidable appeals, because, as the shadow Minister has acknowledged, a costly appeals process will ultimately have an impact on costs for passengers.

It is also reasonable that other stakeholders should be entitled to assume that, where it has appealed and failed, a party will not then ordinarily be able to relitigate points or to raise fresh points directly or through connected persons. Essentially, the change proposed in the amendment would allow people to have two bites of the cherry and to seek to appeal again about something that really should have been dealt with by a previous appeal. If we were to adopt the amendment, the appeal system would become longer, more costly and less efficient.

On what the shadow Minister said about connected parties, I am slightly struggling to find where they are defined in the Bill; I am sure that is in there somewhere. Certainly the concept of a connected person is used in a number of different contexts. It tends to be defined in relation to each specific context. [Interruption.] I am assisted by a note that mentions clause 71.

I will certainly look into the matters that the hon. Gentleman has raised. It is important to have clarity in relation to who counts as a connected person and to ensure that appellants cannot use connected parties to enable them to have a second chance at an appeal that should really have been covered by a previous one. That could prove unnecessarily costly and protracted. We should retain the restriction on pursuing appeals via connected persons. I will double-check where the definition of connected persons appears in the Bill.

John Woodcock (Labour, Barrow and Furness)

On the basis that the Minister can write to me on the second point, I beg to ask leave to withdraw the amendment.

John Woodcock (Labour, Barrow and Furness)

I beg to move amendment 44, in schedule 2, page 77, line 28, leave out sub-sub-paragraph (b).

This is another probing amendment, which asks the Minister why the three-person group established by the Competition Commission to consider and determine appeals would not have to reconsider any decision made or direction given by the group before one of its members had been replaced, if that needed to happen.

One of the reasons for removing a group member could be that, because of a particular interest, it would be inappropriate for that person to remain a member of the group. That is set out in paragraph 17(1)(c). That implies that someone could have been a member of the group reviewing an appeal when they had a commercial or personal interest that would lead them to have a biased judgment. I should be grateful if the Minister explained why, if the members had to be changed under those circumstances, what had gone before could still stand and the group would not necessarily have to reconsider previous decisions.

Theresa Villiers (Conservative, Chipping Barnet)

I am confident that the provision as drafted offers a sensible and balanced approach to replacing members of the group and does not pose a threat to justice being carried out in a proper and fair way. If there were any possibility of a bias or an apparent bias, replacing the member would not of itself cure that. Paragraph 17(3)(b) provides that the mere fact that a member is replaced does not of itself affect earlier decisions. We believe that this is a sensible and practical approach to this issue that does not cause injustice. Allowing the amendment would mean that any change in the Competition Commission group determining the appeal would or could have an adverse impact on all earlier decisions by the group and might require proceedings to be restarted.

This is another instance in which I fear that if the amendment were adopted, we could end up with a slower, more costly system that ultimately would not be in passengers’ interests. Returning to the start of the decision-making process merely because of a change to the membership of the Competition Commission panel could prove expensive, and is not in line with our wish to have a smooth-running appeals process that delivers a timely resolution.

Changes to the composition of appeals panels are inevitable. For perfectly ordinary reasons, people move on to different roles or jobs. If every appeal had to start from scratch whenever a panellist left the Competition Commission, that would lead to considerable extra costs and delay, which would not be in the interests of airports, airlines, the CAA or passengers.

If a member were replaced because of the possibility of apparent bias, it would remain open to anyone with sufficient interest to seek to have the decision or the proceedings quashed by the High Court, on that basis. Equally, if replacing a member part way through the appeal would result in an incurably unjust or unfair hearing, again, the High Court could intervene. The High Court’s powers and public law remedies should ensure that any real injustice arising from the underlying reason for replacing a member will remain subject to an appropriate legal process.

Similar provisions to those in the Bill are in operation in the regulation of electricity and gas markets, without causing problems. I hope therefore that the shadow Minister is reassured that the provision in the Bill serves an important practical purpose when, for various ordinary reasons, the composition of the panel changes. However, as it would not, in any sense, inhibit redress where there is concern about apparent bias in relation to a member of the panel taking decisions for the Competition Commission, I hope that the shadow Minister feels able to withdraw the amendment.

John Woodcock (Labour, Barrow and Furness)

We will reflect on that response. I beg to ask leave to withdraw the amendment.

Clause 43 - Amount of penalty

John Woodcock (Labour, Barrow and Furness)

I beg to move amendment 45, in clause 43, page 29, line 25, at end add—

‘(d) any steps taken by that person which aggravates the damage caused by contravention of the condition or requirement.’.

This is another probing amendment that seeks a response from the Minister on whether penalties given by the CAA for contravention of a licence should take into consideration whether any actions taken by the person who broke the licence could be seen as having been done in an aggravating manner. I have tabled the amendment because clause 43(3)(c) obliges the CAA, when setting the penalty level, to have regard to

“any steps taken by that person towards remedying the consequences of the contravention”.

A penalty can be lowered if the person who broke a licence condition took action to reduce the impact of that breach, so surely it is only right for someone who did the opposite to be penalised. Why does the Bill not set out provisions to do that?

Theresa Villiers (Conservative, Chipping Barnet)

First, I welcome the consensus that has greeted the clauses that we have just adopted. They contain important provisions and I welcome the fact that they have been adopted unanimously and without dissent—an indication of the strength of the overall framework in the Bill. The enforcement regime that it contains is echoed in a number of existing areas of economic regulation, and I welcome the support that the Committee has shown.

Amendment 45 gives us the opportunity to look more closely at the penalties regime, which is an important element of the new system for economic regulation. As the shadow Minister explained, amendment 45 would oblige the CAA to take account of any steps that a person had taken that aggravated the damage caused by their contravention of a relevant condition or requirement. I note that the amendment does not require that the person should have intended to aggravate the damage, but only that the contravention should have had that effect.

The purpose of the enforcement and penalty regime in general, and clause 43 in particular, is to bring airport licensees back into compliance as soon as possible and to discourage non-compliance. The factors set out in clause 43(3), to which the CAA must have regard in determining the amount of penalty, are mitigating factors. When the CAA determines the amount of penalty, those factors permit it to make allowance for the licence holder’s efforts to return to compliance, and they are likely to motivate the operator by providing a financial incentive to move towards compliance.

Other regulatory regimes adopt similar mitigating factors. Ofcom, for example, must have regard to the same considerations under section 97(2) of the Communications Act 2003. The addition of an aggravating factor to clause 43(3) for the purposes of penalising the licence holder would be inconsistent with the Bill’s approach to the use of penalties for encouraging compliance.

Nothing in the Bill prevents the CAA from taking the matters raised in the amendment into account in determining the amount of the penalty. I hope I can reassure the shadow Minister on that point. If the CAA wants to do so, it may set out that intention in its statement of policy on penalties, which it is required to prepare and publish under clause 58.

It is also worth noting that no one who provided evidence to this Committee or the Transport Committee requested such a change. For those reasons, the Government do not consider the amendment to be necessary, but I hope I have been able to reassure the shadow Minister that the CAA will have the option of taking into account matters such as those specified in the amendment.

John Woodcock (Labour, Barrow and Furness)

I thank the Minister for that helpful explanation. If the Bill does not need to confer on the CAA the power to increase a penalty, because the CAA can do so anyway, why does the Bill give it the power to lower a penalty?

Theresa Villiers (Conservative, Chipping Barnet)

It is important to provide licensees with a financial incentive to remedy their behaviour as quickly as possible, so there is a reasonable argument for including that provision in the Bill. I have listened to what the hon. Gentleman has said about aggravating factors, but I assure him that there is nothing to prevent the CAA from taking those into account in determining the level of a penalty. For that reason, I must continue to oppose the amendment.

John Woodcock (Labour, Barrow and Furness)

I hear what the Minister says about the financial incentive for acting, but one could equally make the case for spelling out the deterrent effect of the approach set out in the amendment. We will not force the amendment to a vote, but we will consider returning to it further down the track, so I hope that she will reflect on it ahead of Report. I beg to ask leave to withdraw the amendment.

Clause 44 - Amount of penalty: fixed amount

John Woodcock (Labour, Barrow and Furness)

I beg to move amendment 46, in clause 44, page 29, line 28, leave out ‘10%’ and insert ‘15%’.

Linda Riordan (Labour, Halifax)

With this it will be convenient to discuss amendment 47, in clause 45, page 30, line 41, leave out ‘0.1%’ and insert ‘0.15%’.

John Woodcock (Labour, Barrow and Furness)

These amendments are simply designed to try to get the Minister to spell out the reasoning behind the size of the penalty imposed on a person who breaks the licence. What is the rationale for deciding that the penalty should not be higher than 10% of a person’s turnover for the qualifying period? We have suggested a penalty of 15%, but that is an equally arbitrary figure. We have tabled the amendment so that the Minister can explain why she believes that 10% is an appropriate figure. Why should the penalty not be higher—or, indeed, lower—than that?

In a similar vein, amendment 47 increases the daily penalty to 0.15% of a person’s qualifying turnover for the qualifying period. Why was the original figure of 0.1% decided on as the maximum level of the daily penalty charged for breaking a licence? Why is that figure not higher or lower than that?

Nigel Mills (Conservative, Amber Valley)

I rise to oppose the amendment, and to pose a couple a questions about how the penalties are calculated.

Penalties based on turnover can be burdensome for any business. If a business is operating on a low margin, a fine based on turnover can more than obliterate the entire profit made in the given period. However, we are talking about a licensed operator abusing its market power, or breaching its conditions, in such way that a penalty is appropriate. That means that a serious offence has occurred. A significant financial penalty should act as an effective deterrent to such behaviour, and I have no objection to that.

According to the regulatory accounts of Heathrow Airport Ltd for the most recent financial year to 31 March 2011, its total revenue was about £1.8 billion and its regulatory operating profit was £538 million. A 10% fine based on that total revenue would effectively account for a third of its profits. We may accept that as reasonable, and I suspect that Heathrow could probably stand that type of fine on a one-year basis.

However, if we are trying to encourage airports to invest in improving the quality of service, letting fines sneak up to 15% of turnover or higher seems to be detrimental. We all know that other airports across the country, which I accept are not currently regulated, are struggling to make any money at all. Allowing the CAA to impose ever-increasing fines, regardless of an airport’s profit or return, would not be a sensible way to encourage the investment that our airports need.

I would say that 10% seems a relatively sensible level. It would certainly be a significant cost to any business, and I do not think that any airport would engage in anti-competitive behaviours or other flagrant breaches of its licence because it thought that penalty too slight to be worth worrying about.

My real concern is exactly what we are including in the definition of turnover. In fact, subsection (7) allows the Secretary of State, by regulation, to modify the definition of qualifying turnover. I know subsection (8) suggests what those modifications might be, but there is no actual definition of what could be done. Will the Minister run through the scenarios for which she thinks she needs that power?

I accept that I may have missed this somewhere, but, from my reading, the Bill is not entirely clear whether turnover based on regulatory accounts means revenue from airport charges or from other revenue, too. Heathrow’s accounts, for example, contain revenue from retail operations, property revenue, rail revenue and other revenue. Are we talking about a fine based on total turnover that includes all those things, or are we talking about a fine that only affects the area in which a breach occurred, which may well be in the airport operations, rather than all those other things?

I am intrigued by what happens when an airport operator with retail or catering operations sells a long-term franchise for an upfront fee and therefore does not generate any annual turnover. There might be an accounting distortion in which a fine could get at the retail and catering income of some airports, whereas airports that have lost such income seven years ago for a flat fee are not accounted for in that way. Will the Minister clarify the scope of the power she is taking in subsection (7) and how we can ensure that fines are imposed on a consistent basis across all regulated airports?

Theresa Villiers (Conservative, Chipping Barnet)

Like my hon. Friend, I am not convinced that amendments 46 and 47 seek the right changes, so I hope that they will not be pressed to a vote. I also hope I am able to provide some reassurance in response to the shadow Minister’s questions.

Like the shadow Minister, I propose to address the amendments in the round as they both seek to raise the maximum penalty for contravening a licence condition by 50%. Amendment 46 seeks to raise the annual penalty from 10% to 15% of an airport’s annual turnover and amendment 47 seeks to raise the daily fine from 0.1% to 0.15% of annual turnover.

In response to my hon. Friend the Member for Amber Valley, I should say that the qualifying turnover referred to in subsection (7) is total revenue, so it does include revenue in addition to landing charges.

Looking at airports currently subject to economic regulation is useful when considering the impact that the Bill and the amendments would have in practice. At Heathrow, amendment 46 would increase the potential maximum 10% fixed-penalty from £186 million to £278 million; at Gatwick, the maximum fine would go up from £46 million to £69 million; and at Stansted, the maximum fine would go up from £22 million to £33 million.

I listened carefully to what the shadow Minister said. I agree that there are convincing arguments in favour of setting the maximum penalties for contravening airport economic regulation at high levels. Such arguments are applicable across many spheres of competition law, where the 10% and 0.1% figures, contained in the clauses, are also employed.

The shadow Minister asked what the rationale was for selecting those figures. They are in use in other contexts—for example, in relation to important aspects of European competition law. We need high maximum fines in this regard because breaching rules on competition and economic regulation can sometimes be profitable. That is why the maximum penalties need to be substantial enough to hurt, in the event that the regulator chooses to impose them.

John Woodcock (Labour, Barrow and Furness)

Does the Minister have to hand the European parallels that she mentioned and will she illuminate the Committee about those?

Theresa Villiers (Conservative, Chipping Barnet)

Yes, certainly. My example is article 23 of Council regulation EC No. 1/2003 of 16 December 2002 on the implementation of the rules on competition, which applies, as I said, to maximum penalty levels of 10% return on the financial liability of businesses. That is a fundamental plank of European competition law.

The reality is that the maximums in the Bill are high; I do not see a case for raising them further. A fine of more than £180 million is tough enough to be a genuine deterrent, even for a company as large and successful as BAA. None of the witnesses who gave oral evidence to the Committee asked for that change and it was not requested, so far as I know, in written evidence. Indeed, the Airport Operators Association said to the Transport Committee, during pre-legislative scrutiny, that the proposed levels were too high.

The cap of 10% of turnover for a fixed penalty represents the maximum threshold available to other regulators, such as the Office of Fair Trading under section 36(8) of the Competition Act 1998. We have already covered the use of the same 10% threshold in European law. It is worth hon. Members recalling the points made by Iain Osborne of the CAA when these matters were raised with him. In his words, it is rare—almost unheard of—for fines to hit that high 10% figure. In many ways, we seek to provide a deterrent.

It is worth drawing the Committee’s attention to the reputational effect of having been fined at all. The reputational effect of the fine, apart from its financial impact, is an important means of ensuring that management teams change their behaviour and remedy the non-compliance. Undoubtedly, we have a tough penalties regime and we have the balance about right: it would provide an effective deterrent and I do not see the need to raise the thresholds in the way that the shadow Minister advocates. I hope that he asks to withdraw his amendment.

John Woodcock (Labour, Barrow and Furness)

On that basis, I beg to ask leave to withdraw the amendment.

Clause 51 - Enforcement of information notice

John Woodcock (Labour, Barrow and Furness)

I beg to move amendment 52, in clause 51, page 33, line 12, leave out ‘£2,000,000’ and insert ‘£3,000,000’.

Linda Riordan (Labour, Halifax)

With this it will be convenient to discuss the following: amendment 53, in clause 51, page 33, line 13, leave out ‘£100,000’ and insert ‘£150,000’.

Amendment 54, in clause 51, page 33, line 20, leave out ‘replace’ and insert ‘increase’.

John Woodcock (Labour, Barrow and Furness)

These amendments are intended to probe, as is becoming customary this morning. Amendments 52 and 53 probe the penalties for those who fail to comply with a CAA request, by notice, to provide information or documentation. I hope that the Minister will take the opportunity to explain why the level for a fixed penalty is set at £2 million in subsection (4). We suggest, with no particular rationale, that that should change to £3 million. We also suggest that the daily penalty of £100,000 should be changed to £150,000. That gives the Minister the opportunity to explain— I am sure she is looking forward to it—why she set those levels, and the rationale behind them.

Amendment 54 also relates to penalties for those failing to comply with a CAA request to provide information or documentation. Subsection (9) gives the Secretary of State the ability, by regulations, to replace the amount at which a fixed penalty can be set, either for a daily penalty or a fixed penalty. The amendment would prevent the Secretary of State being able to undermine the CAA’s ability to penalise non-compliance with its notices, if the Secretary of State was minded to choose to reduce the level of the penalty.

If the regulating power could only increase a penalty, it would be used only if the CAA’s maximum penalty was deemed insufficient by the Secretary of State. Can the Minister envisage any situation in which she would seek to reduce the penalty? If not, why not simply accept our amendment?

Theresa Villiers (Conservative, Chipping Barnet)

I am grateful to the shadow Minister for explaining the rationale behind the amendments and indicating that they, like the others that we have considered this morning, are probing in nature.

The hon. Gentleman’s main question concerned the rationale for selecting the figures. One rationale is that the penalties set out in clause 51 are broadly in line with those of other regulators in other systems of economic regulation. For example, they are in line with the maximum penalty provided for Ofcom in section 139(5) of the Communications Act 2003. The Government and I consider the maximum fine proposed in the clause sufficient to dissuade and have a significant deterrent impact. Indeed, in May 2011, Ofcom increased its maximum penalty to that level. I do not believe that we have heard a cogent case for a higher level than the Bill currently provides for.

Clause 51(9) gives the Secretary of State the power to make regulations to vary the amount that we have discussed. In amendment 54, the Opposition seek to change the Secretary of State’s power to vary those amounts so that she would be able only to increase them. The power and the flexibility provided by subsection (9) are an important element of the regulatory framework that we are setting up, ensuring that the maximum amount set in the Bill can be adjusted over time to reflect changes in monetary value. It will also ensure that the amount of the penalty remains dissuasive and a proportionate means of enforcing compliance.

I agree that it is not very likely that the power will be used to decrease the maximum penalty; if a change is made, it is far more likely to be in an upward direction. It is conceivable that there might be circumstances in which a decision is made to decrease the penalty. I do not see that a case has been made to place a further restriction on this power. Inevitably, when one talks about fines and monetary values, there is merit in ensuring that we have flexibility to respond to changing circumstances in the future. Of course, any powers given to the Secretary of State in secondary legislation are subject to the appropriate scrutiny processes in Parliament.

Gavin Shuker (Labour, Luton South)

Did the Minister look at any other industries in setting the figures, in terms of the particular offence that she discussed under the power to obtain information?

Theresa Villiers (Conservative, Chipping Barnet)

As I mentioned, there is a direct comparison with the regulatory regime applicable in the communications industry. I am not sure whether the same approach is taken in different sectors, but that is certainly an example of where a similar system already operates without causing problems.

John Woodcock (Labour, Barrow and Furness)

On that basis, I beg to ask leave to withdraw the amendment.

Clause 58 - Statement of policy on penalties

John Woodcock (Labour, Barrow and Furness)

I beg to move amendment 55, in clause 58, page 36, line 24, at end add ‘, including—

(a) any person in receipt for the time being of a licence;

(b) such bodies representing airport operators or providers of air transport services as are appropriate;

(c) any person who for the time being may be subject to a penalty; and

(d) any person or body representing those adversely affected by contravention of licence conditions or failure to produce information.’.

Well—[Interruption.]If Committee members were expecting witty repartee and jokes, I am sorry but, as they may have noticed this morning, I left them at the door. I can try to liven things up if they want, but they may regret it.

This probing amendment applies to the clause on the Civil Aviation Authority’s statement of policy on penalties. The Opposition suggest adding significantly more detail into the Bill, including the addition of various people and bodies to the list of people whom the CAA must consult on appropriate levels of penalties. The intention is to ensure that those most likely to be subjected to penalties charged by the CAA, for example, the licence holders or others who may be affected, are given a chance to be consulted on how the penalties would work. I am keen to hear whether the Minister agrees that that ought to happen and, if she does, why it is not in the Bill.

Theresa Villiers (Conservative, Chipping Barnet)

I have listened to what the shadow Minister has to say. Consultation is obviously a core aspect of what we will expect the CAA to do under the new regulatory framework. The amendment would introduce provision for four specific groups into the clause. However, the wording proposed by the Government is reflected in other legislation relating to consultation on requirements that regulators face when adopting such statements of policy. For example, section 116(4) of the Enterprise Act 2002 makes provisions similar to those proposed in the Bill.

I agree with the shadow Minister that the CAA should consult all the three groups set out in (a), (b) and (c) of the amendment, and I am confident that it would do so regardless of whether provisions along the lines of the amendment were inserted into the Bill. I cannot see a convincing reason why express provision must be made specifying their inclusion in the clause. I also have concerns about technical problems with the fourth group, (d).

On the phrasing of the amendment, groups (a) and (c), persons in receipt of a licence and persons subject to a penalty, are effectively included in group (b), bodies representing airport operators and air transport service providers. In other words, those in group (b) are likely to include those in groups (a) and (c). There is a degree of overlap that I am not sure contributes to clarity.

Group (d) is defined in the amendment as

“any person or body representing those adversely affected by contravention of licence conditions or failure to produce information”.

That group potentially includes the representatives of hundreds of millions of passengers, the owners of millions of tonnes of freight, the many businesses serving or in the vicinity of regulated airports and, potentially, those with interests in planning, environmental, employment or regeneration matters. In other words, it is very broad and could cover more or less everyone. The group is so large that it is not really meaningful to provide for it in legislation.

I am also unclear why the Opposition have chosen to table amendments on consultation to this clause but not to other parts of the Bill. There are eight other clauses in the Bill requiring the CAA to consult industry representatives where similar provision could have been made. It is not clear why this clause stands out as needing a different and more specific approach than those other important aspects of the new regulatory regime.

John Woodcock (Labour, Barrow and Furness)

If the Minister and the Committee would like us to table seven similar probing amendments and ask her the same questions so that she can give similar answers, that is her call. This was a probing amendment to tease out the issue.

Theresa Villiers (Conservative, Chipping Barnet)

I am grateful for the reminder that this is a probing amendment. However, the Opposition still need to explain why this clause is more important or requires a distinct treatment. Perhaps the best approach I can take is to provide the reassurance that I hope will persuade the shadow Minister to withdraw his amendment.

Graham Stringer (Labour, Blackley and Broughton)

We are coming to the end of a series of clauses on penalties. Will the Minister tell the Committee where the money will go if penalties are imposed?

Theresa Villiers (Conservative, Chipping Barnet)

I must confess that I am not entirely sure. I will have to come back to the hon. Gentleman on that. I presume that it would go to the CAA to use in its general functions, but I will have to take advice. [ Interruption. ]

Graham Stringer (Labour, Blackley and Broughton)

It is on its way.

Theresa Villiers (Conservative, Chipping Barnet)

I am told that it will go into the Consolidated Fund, under clause 57(4). I hope that that provides the clarification that the hon. Gentleman seeks. I would not want the Treasury to think that I was diverting money from the appropriate place.

Turning back to the points raised by the Opposition Front-Bench spokesman, it is important for him and the Committee as a whole to be aware of the general duty on the CAA in clause 1, which we have already considered, to carry out its regulatory activities

“in a way which is transparent, accountable, proportionate and consistent”.

These are the better regulation duties in clause 1. To comply with these explicit duties in the Bill, the CAA will be required to consult, in a number of instances in relation to many decisions, in order to demonstrate that it has complied with the duties in clause 1. In many instances, consultation will be an essential part of the compliance with those duties. That is well established in public law. It is likely that the CAA would be open to judicial review if it failed to consult where that was appropriate. Undertaking full and effective consultation will be one way for the CAA to establish that it has complied with the appropriate duties in clause 1.

The Bill, as drafted, will place important and far-reaching obligations on the CAA to consult. There are many other instances in the Bill where there is an express obligation to consult, in addition to the implicit obligation contained in clause 1, as a result of the better regulation duties contained in clauses 15, 16, 22, 31, 34, 36, 41, 53 and 54. I agree that consultation is important, but the amendment is not necessary because the Bill already provides appropriately for consultation with groups affected by the decisions of the CAA. I therefore hope that the hon. Member for Barrow and Furness will withdraw his probing amendment.

John Woodcock (Labour, Barrow and Furness)

On reflection, I am happy to withdraw the amendment on that basis. I beg to ask leave to withdraw the amendment.

Clause 64 - Review etc of airport operation services

Nigel Mills (Conservative, Amber Valley)

This wide-ranging clause sets out that the CAA must

“keep under review the provision of airport operation services in the United Kingdom and elsewhere, and…collect information about…such services…with a view to facilitating the carrying out of its functions under this Chapter.”

This is all about competition. It would help if the Minister clarified exactly what she expects the CAA to do, and what it is allowed to do. Does she expect it to produce a detailed report on the level of airport capacity in the south-east and on whether there is a need for a new airport—or, heaven forbid, a new runway at any of those airports? To provide competition for passengers in their choice of airlines, routes and airports, there may be a need for more infrastructure.

Does the Minister expect that the CAA could do a review on whether regional variations in air passenger duty could aid competition by diverting traffic elsewhere in the country? That is another idea suggested to us by various people outside the Committee. Those all seem pretty reasonable things that the CAA could review and advise Ministers on to enhance competition or help to develop competition in the air travel market.

I am not sure that the Minister would envisage the CAA generally wandering off, doing things off its own bat and commissioning huge numbers of reports on various things that might or might not contradict the policy of the Government at the time. It would be helpful if she clarified exactly what the Government intend the CAA to do, and when it should be in response to a request, rather than proactive work.

Theresa Villiers (Conservative, Chipping Barnet)

In response to the points raised by my hon. Friend, I shall explain the aim of clause 64. It contains provisions designed to ensure that the markets relevant to airport operation services are kept under review by the CAA and that the CAA has appropriate mechanisms to provide advice and assistance to the Office of Fair Trading, the Secretary of State and the wider public.

Subsection (1) places a qualified duty on the CAA to keep the provision of airport operation services in the UK under review and to collect information about such provision to facilitate the CAA in carrying out its concurrent competition functions set out in chapter 2. Subsection (2) places a duty on the CAA to provide information, advice and assistance to the Secretary of State and the OFT about any matter relating to its concurrent competition functions—on request, if that is practicable, or on its own initiative.

The power to prepare and publish reports relating to airport operation services in subsection (4) is intended to enable the CAA to publish market studies where it considers that appropriate. That will enable the CAA to make use of its sectoral knowledge in examining a whole market in order to identify, and assess the best way of remedying, competition concerns. Subsection (5) gives the CAA the discretion to exclude commercial information or information relating to private affairs from the published document in certain circumstances. Subsection (6) enables the CAA to carry out, commission or provide financial or other support for research in respect of exercising its functions under this clause.

In response to the examples raised by my hon. Friend, I am, as I have said on a number of occasions, reluctant to start suggesting constraints in the context of the Public Bill Committee on the flexibility that we propose to give the CAA, but he can be reassured that as the CAA is subject to a duty to act in a proportionate way, there are limits to the scope of what it would be appropriate for it to do by way of reviews.

The CAA is required to act in an efficient manner by the regulatory framework. That naturally puts constraints on the ambition of the reviews that it would carry out. I would not expect the CAA to seek to trespass on what is, rightly, the territory of Ministers in making decisions on potential capacity needs in the south-east, and I certainly cannot envisage this provision being used to create lots of research on air passenger duty. I think that that would certainly fall outwith the scope of the kind of reviews contemplated.

I do not want to make absolute declarations on what the CAA might or might not do—as I said, this is a flexible provision—but I do not think that either of those areas of work is likely to be the focus of the CAA’s work on this.

Nigel Mills (Conservative, Amber Valley)

I am grateful for those reassurances. However, I expect that people will regularly complain that there is no access to a major hub airport for new connections or new airlines and that that is stifling competition. Does the Minister expect that that would trigger the CAA into having a need to do this review in the short term, or does she think that that is not what the scope of this clause is designed to achieve?

Theresa Villiers (Conservative, Chipping Barnet)

I can reassure my hon. Friend that the Government are looking at overall matters in relation to aviation. We will publish a policy framework for consultation shortly. We are also considering a call for evidence in relation to maintaining a flourishing hub in the south-east. The Government are considering such matters.

The function of the clause is focused on competition matters, which are the focus of economic regulation, examples of which might include dominance or cartel activity, rather than the broader capacity issues that my hon. Friend mentioned.

Clause 66 - Airports

Jim Fitzpatrick (Labour, Poplar and Limehouse)

I beg to move amendment 56, in clause 66, page 40, line 27, leave out ‘modify’ and insert ‘amend’.

Linda Riordan (Labour, Halifax)

With this it will be convenient to discuss the following: amendment 57, in clause 66, page 40, line 28, leave out ‘modify’ and insert ‘amend’.

Amendment 58, in clause 66, page 40, line 29, leave out subsection (5).

Jim Fitzpatrick (Labour, Poplar and Limehouse)

We hope that these simple probing amendments provide the opportunity for us to seek clarification from the Minister. The clause does not allow the Secretary of State to repeal by secondary legislation the definition of an airport. If it does, perhaps the Minister will explain why such a provision is needed. We are relatively sure that the Secretary of State is not trying to achieve that end, but we would be grateful for the reassurance.

Subsection (3) states:

“The Secretary of State may by regulations”.

Subsection (4) states:

“The regulations may, in particular…modify”

all the subsections above and

“the definition of the core area of an airport in section 5.”

Subsection (5) states:

“‘modify’ includes amend or repeal.”

The clause is drafted widely in terms of giving the Secretary of State power to redefine what an airport is, although the Bill is all about airports. We seek clarification from the Minister about whether that is intended and, if it is, an explanation about why “airport” may need to be redefined linguistically in future.

Theresa Villiers (Conservative, Chipping Barnet)

I am grateful for the indication that this is a probing amendment. The clause provides a power for the Secretary of State to use regulations to change two definitions contained within it: first, the definition of an airport in clause 66(1) and clause 67(1) and, secondly, the definition of the core area in clause 5.

In the Government’s view, it makes sense to have the option to amend those definitions via secondary legislation, because what could constitute an airport may change over time. Experience since the previous legislation was enacted in 1986 demonstrates that the nature of the aviation market can change significantly over time. We are considering an economic regulation framework that we hope will last upwards of 20 years.

Because we want the legislation to last, it is prudent to retain some flexibility to adjust the definition if experience subsequently proves that that would be the right thing to do.

Graham Stringer (Labour, Blackley and Broughton)

I am intrigued by what the Minister is saying. There have been huge changes in the aviation industry in the past 25 to 30 years and a number of changes in the past 60 years, but I do not think that the definition of airports and aerodromes has changed. I should be grateful if she helped the Committee by providing some examples of what she might mean.

Theresa Villiers (Conservative, Chipping Barnet)

It is not appropriate at this stage to prejudge, but we had a debate about the distinction between core and non-core areas. The aim of the provisions is to ensure that, while the CAA would be able to regulate facilities such as parking where a core area of the airport, such as the terminal or the runway, passed the appropriate test, we do not end up in a situation where the CAA finds itself regulating car parks at an airport when the main areas of the airport itself do not fall within the appropriate definition.

We have degree of complexity in determining the distinction between core and non-core areas. People’s perception of what amounts to a core and a non-core area has the potential to change over time, which is one reason why it is appropriate to include some flexibility. It is worth the Committee noting that such a change, if the Secretary of State chose to make it, would be subject to the affirmative resolution procedure, and therefore a debate in Parliament.

There are also some technical problems with the amendment; I am not sure that they would achieve what they are designed to achieve. If the Secretary of State was minded, she could amend the definition to leave effectively a ghost definition, which would have the same effect as repealing it. If the Opposition accept the need for the power to amend, there is no need to remove the option for the Secretary of State to remove parts of the definition.

I hope that that has provided some clarity. I am unable to accept the amendment, but I hope that Opposition Front Benchers will consider withdrawing it.

Jim Fitzpatrick (Labour, Poplar and Limehouse)

I am grateful to the Minister for attempting to clarify the situation. Given the additional question from my hon. Friend the Member for Blackley and Broughton about the basis of our questioning—whether an airport is likely to change in the future—we are not entirely convinced that the Minister has reassured us. However, as I said, it was a probing amendment and the Minister has explained the thinking behind the clause. We will reflect further on her words once we see them in print. In the meantime, I beg to ask leave to withdraw the amendment.

Clause 67 - Airports: supplementary

Nigel Mills (Conservative, Amber Valley)

I have two questions. I am sorry for detaining the Committee again. There are lots of lovely definitions here, which seem to excite my interest.

Subsection (3) states:

“A car park is a qualifying car park if…it has pedestrian access to such a terminal.”

I presume that “pedestrian access” does not mean a pavement between a separate car park and the terminal building, but a dedicated passenger tunnel, or something that links the two together completely. Otherwise, an open patch of ground or long-running pavement from one to the other could be regarded as pedestrian access. I assume the logic of that is not what is intended, but I am not quite sure how we interpret that definition.

According to clause 5, an airport does not include a bus station, tram station or a railway station. I think we have been reassured in the past that a regulated airport would be allowed to include the costs of developing, maintaining or enhancing such stations in their regulated assets for the purposes of the charges they can pass on to the airlines. Is that entirely consistent with the definition that an airport does not include a railway station or a bus station?

Earlier, I asked the Minister about the calculation of a fine and the turnover of an airport. She kindly confirmed that the turnover would include all the revenue the airport operator derives, which, in Heathrow’s case—certainly in the accounts I quoted—included income from the railway station. I cannot quite square that with a definition of an airport that excludes the railway station. Will she clarify exactly when railway stations and so forth will fall within an airport for regulatory purposes, and when they will fall outside it?

Theresa Villiers (Conservative, Chipping Barnet)

Clause 67 provides further clarification on what is and is not included in the definition of an airport. For example, subsection (6) states that a passenger who has not arrived by air arrives at the airport when they arrive at one of the following: a terminal building, a terminal forecourt, or a car park with pedestrian access to the terminal. It is not intended that that should apply to the sort of dedicated, particular pathway to which my hon. Friend referred. The mere fact of pedestrian access is relevant.

On the other hand, the airport does not include car parks without pedestrian access, hotels unless they are part of the passenger terminal or bus, tram or railway stations. We do not think that it would be right to include bus, tram or railway stations in the definition of an airport because, where appropriate, they are already subject to economic regulatory regimes. However, as we have discussed, I am confident that where it is in the end user’s interest in the provision of airport operation services to include railway assets in the airport’s regulated asset base, the CAA will have the discretion to do so. Nothing in the clause will prevent the CAA from doing so, which I think is the point about which my hon. Friend was concerned.

Graham Stringer (Labour, Blackley and Broughton)

I would be grateful if the Minister explained why a hotel should be included when it is in a terminal. It makes no difference whether a hotel is within or outside the terminal; it is usually independently operated. I know that she has been to Manchester airport, where there is a Radisson hotel halfway between two terminals connected by a skywalk. Is that particular hotel included within the definition of being in a terminal?

Theresa Villiers (Conservative, Chipping Barnet)

I am afraid that the hon. Gentleman is assuming too much about my knowledge of the layout of Manchester airport. I am unable to answer his points about the Radisson hotel, but as we have discussed on numerous occasions during this Committee’s deliberations, Manchester airport is not subject to regulation, and there is no immediate prospect that it will become so. I suspect that that is not something Manchester airport will need to worry about as a practical issue in the immediate future.

The Bill contains several safeguards to ensure that the scope of the CAA’s licensing powers is not necessarily limited to the airport. Clause 21(1)(f) allows for licence conditions relating to activities carried on outside the airport area for which the licence is granted. The primary duty is broadly to further the interests of end users with regard to the provision of airport operation services. Plainly, it is in the interests of users in the provision of airport operation services to have strong service access links to an airport; otherwise, many passengers might have to access the airport at a higher cost.

I hope that that covers the questions asked. I commend the clause to the Committee.

Clause 71 - Index of defined expressions

Theresa Villiers (Conservative, Chipping Barnet)

I thought it might be appropriate for me to interpose briefly, as this gives me an opportunity to respond to one of the questions I was asked this morning. I hope to address the queries raised earlier by the hon. Member for Barrow and Furness about the meeting of “connected persons”, as dealt with in clause 71. The clause defines the concept of connected persons used throughout part 1 of the Bill, including in clauses 3, 16, 21, 23, 25 and 44, and schedule 2. Clause 71 states that “one person is connected with another if they are group undertakings in relation to each other.”

This definition has the same meaning as in the Companies Act 2006. Providing this interpretation of “connected persons” is necessary to make part 1 of the Bill work effectively and it is predominantly used to ensure that parties do not use “connected persons” as an anti-avoidance measure to avoid the prohibitions in the Bill.

Clause 73 - Regulations

Jim Fitzpatrick (Labour, Poplar and Limehouse)

I beg to move amendment 60, in clause 73, page 44, line 9, leave out subsection (3).

Linda Riordan (Labour, Halifax)

With this it will be convenient to discuss amendment 61, in clause 73, page 44, line 16, leave out ‘other’.

Jim Fitzpatrick (Labour, Poplar and Limehouse)

The Minister mentioned the affirmative procedure for statutory instruments. The intention of these probing amendments is to seek to ensure that all regulations in the Bill have to be made by positive resolution. If our interpretation is correct, it would be useful if the Minister explained why it is proposed to make the regulations under clause 28(9), clause 77, paragraph 32 of schedule 2 and paragraph 6 of schedule 6 through the negative procedure. We should have thought that the affirmative procedure was more proper.

Theresa Villiers (Conservative, Chipping Barnet)

I am grateful for the opportunity to scrutinise the clause. I emphasise that the Delegated Powers and Regulatory Reform Committee in the other place will scrutinise each of the statutory instrument powers in greater detail in due course, but I appreciate that hon. Members will want to consider the rationale for the provisions in the clause now as well.

The amendment seeks to change the statutory instruments in part 1 that are currently subject to the negative procedure to the positive procedure. We believe that where the Bill currently specifies the negative procedure, that will provide sufficient parliamentary scrutiny, having regard to the nature of the provisions. As hon. Members may know, many of the provisions dealing with subordinate legislation require the affirmative resolution procedure to which all of the following, for example, are subject: changes to the definition of an airport, which we discussed earlier; changes to the definition of “airport operation services” in clause 68; and regulations made under clause 9 clarifying when a person is to be treated as having overall responsibility for the management of an airport area where more than one person exercises some management responsibility.

In response to the hon. Member for Poplar and Limehouse, I shall look at each area where the Bill provides for negative resolution. The first is clause 28(9) and paragraph 32 of schedule 2, relating to time limits. The provisions empower the Secretary of State to modify time limits for an appeal to the Competition Commission regarding licensed content. The provisions are primarily procedural and do not empower the Secretary of State to make fundamental changes to the competition appeals regime. Accordingly, we do not feel that the more intense scrutiny provided by affirmative resolution is necessary.

The next relevant matter is in clause 7, which contains two powers to make subordinate legislation, both of which are also subject to negative resolution. The first is in clause 77(10), which empowers the Secretary of State to exempt an airport area. It is applicable only where the airport was not open to commercial traffic in the previous year or where the airport area consists of all or part of a small airport—that is, an airport with fewer than 5 million passenger movements in the previous calendar year. Those requirements are necessary to ensure that the power cannot be used in circumstances where European legislation may prohibit the use of the powers, namely the directive on airport charges. The predominant purpose is to allow military airports to be exempted from regulation under the Bill. Having regard to the qualifications to the use of the power, and to its expected purpose, we have again taken the decision that it is not necessary to require subordinate legislation made under this power to be subject to the affirmative resolution procedure.

A further relevant power is contained in clause 77(12). That empowers functions that may be carried out by or on behalf of the Crown to be exempted from economic regulation under part 1 of the Bill, in addition to those functions listed in clause 77(12) such as police functions. For example, if in future health screening took take place at an airport, that might be added to the exemptions contained in clause 77. The Crown operator of those functions could in theory come within the scope of economic regulation without such an exemption. The underlying policy is that Crown functions should be accountable to and through Parliament, rather than to the CAA. In light of that, we think it appropriate that the exercise of this power should be subject to the negative resolution procedure.

Schedule 6(6) contains the final power relevant to the matters raised by the shadow Minister. It allows the Secretary of State to amend paragraphs 4 and 5, which list the relevant persons to whom disclosure of information may be permitted under the listed statutory provisions, in order for those persons to carry out their regulatory functions. Having regard to its limited purpose and the frequency with which it can change, again, we do not think it necessary to require subordinate legislation made under this power to be subject to the affirmative resolution procedure.

I hope that has given the shadow Minister some insight into the distinction drawn between delegated powers that we propose should be subject to affirmative resolution, and those which are sufficiently technical and procedural to be subject to negative resolution. I hope that provides the assurance he wants.

Jim Fitzpatrick (Labour, Poplar and Limehouse)

I am grateful for the Minister’s clarification and beg to ask leave to withdraw the amendment.